Prabhudas Lilladher's research report on Eicher Motors
Eicher delivered a positive surprise with consolidated EBITDA margin of 24.5% (+80bps QoQ) vs our estimates of 23.2%. RE has recently launched Hunter 350, which is expected to bring on board new customers owing to its attractive pricing (~Rs 1.5 lakhs for factory model) and differentiated product offering (light in weight, non-cruiser, urban fit). It delivered highest ever quarterly exports of ~29k units in 1QFY23 (vs ~25k in 4QFY22). We expect export business to witness significant growth over the next few years (we build in 30% volume CAGR over FY22-24E) led by channel expansion and market share gains. With new model launches in the pipeline, commodity cost moderation and chip supply stabilizing, we expect operating leverage to kick in. At VECV, demand continues to witness traction led by cyclical recovery. We maintain BUY on Eicher Motors as we anticipate (1) volume growth from new product launches (2) rising exports volume from channel expansion and market share gains and (3) margin expansion as operating leverage kicks in (we build in ~380bps EBITDAM expansion over FY22-24E).
We increase our EPS estimates by 2/5% for FY23/24 and assign a revised SoTP based TP of Rs 3,400 (at 28x FY24E EPS for standalone business vs 27x earlier to factor in positive outlook and 18x for VECV).
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